January 12, 2013

The debt-ceiling debate is unlikely to alter one major factor contributing to income inequality: stagnant wages.

.... Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.

... Some economists say it is wrong to look at just wages because other aspects of employee compensation, notably health costs, have risen. But overall employee compensation — including health and retirement benefits — has also slipped badly, falling to its lowest share of national income in more than 50 years while corporate profits have climbed to their highest share over that time.

Conservative and liberal economists agree on many of the forces that have driven the wage share down. Corporate America’s push to outsource jobs — whether call-center jobs to India or factory jobs to China — has fattened corporate earnings, while holding down wages at home. New technologies have raised productivity and profits, while enabling companies to shed workers and slice payroll. Computers have replaced workers who tabulated numbers; robots have pushed aside many factory workers.

Uh, I can think of another cause, which drives up supply of labor, which, ceteris paribus, drives down pay. But then I'm not a conservative nor a liberal economist, who appear to have both sworn a sacred oath to never mention the I-Word except in happy-clappy contexts.

“Some people think it’s a law that when productivity goes up, everybody benefits,” says Erik Brynjolfsson, an economics professor at the Massachusetts Institute of Technology. “There is no economic law that says technological progress has to benefit everybody or even most people. It’s possible that productivity can go up and the economic pie gets bigger, but the majority of people don’t share in that gain.”

From 1973 to 2011, worker productivity grew 80 percent, while median hourly compensation, after inflation, grew by just one-eighth that amount, according to the Economic Policy Institute, a liberal research group. And since 2000, productivity has risen 23 percent while real hourly pay has essentially stagnated.

Meanwhile, it’s been a lost economic decade for many households. According to the Center for Budget and Policy Priorities, median income for working-age households (headed by someone under age 65) slid 12.4 percent from 2000 to 2011, to $55,640. During that time the American economy grew more than 18 percent.

... MANY economists say the stubbornly high jobless rate and the declining power of labor unions are also important factors behind the declining wage share, reducing the leverage of workers to demand higher wages. Unions represent just 7 percent of workers in corporate America, one-quarter the level in the 1960s.

Calling the ghosts of Cesar Chavez and Samuel Gompers: perhaps, if you guys weren't dead, you could enlighten the NYT and the economics profession why massive immigration is bad for the negotiating power of unions....

It is often thought that college graduates can escape these unfortunate wage trends. But college graduates — hit by the bursting of the tech bubble in the late 1990s and then by the deep recession — have been hit hard, too. Seventy percent of the nation’s college grads have had their after-inflation hourly wages decline since 2000, according to the Economic Policy Institute, with the typical graduate experiencing a 3.1 percent decline.

Jared Bernstein, who served in the Obama administration as executive director of the White House Task Force on the Middle Class, said many steps should be taken to increase labor’s income share, including raising the minimum wage, pushing down the jobless rate, enacting laws that make it easier for workers to unionize and increasing wage subsidies for those on the bottom.

But don't mention the I-word!

Steven Greenhouse is a reporter on labor and workplace issues for The New York Times, and author of “The Big Squeeze: Tough Times for the American Worker.”

50 comments:

Anonymous
said...

People also like the cheaper south which opposes the labor unions. In Texas the better paying jobs are in Houston not Austin from what I heard. A nurse was shock at the pay for nurses in Austin. The oil industry keeps the wages up in Houston while the high tech stuff actually has added a lot of 11 to 13 per hr factory jobs in Austin. Granted, a New Yorker or a Californian that makes under 15 an hr is better off in North Carolina or Florida than certain parts of New York and a Californian making less than $15 ah hr is better off in Nevada or Arizona or Texas.

Over on the UK left-wing blogs there's a sudden flurry of "What's gone wrong with the Left" posts.

After all, capitalism is in crisis, wages static while the cost of living rises remorselessly - where's all the worker and trades union militancy? Why aren't people flocking to the left parties (you know, the ones who beat up anti-immigration activists)?

They just don't seem to be able to work it out. After all, unemployment was high back in the 1930s, or in the nineteenth century - yet the labour movement was growing then, and now it's shrinking.

(Needless to say any comments suggesting that the I-word might be relevant are immediately deleted. Heresy!)

Well, Walmart has also got down the wages of retail workers, the grocery stores use to pay better in some places than lower skilled manufactoring but the $30,000 a year grocery worker in 1990 is down to under $20,000 less it usually less than 40 hrs and the wages are closer to the $7.35 to $10.00 start these days.

Automation also destroyed the best paying jobs at call centers which were operator jobs. They were pretty unionized my mother work for AT&T and Pacific Telsis. Today operators are down and most of the work is billing. Why is my Cell Phone Bill so high and a lot of it is outsource to outsource Call Center companies. Granted, they are full time and have benefits but unless you are able to do a lot of overtime or get good bonuses for selling plans they don't pay as well.

Women nowadays always groan when someone says that, but it's worth saying probably. I remember reading once that in the 1920s, during the aftermath of WW1 and the heyday of the Progressive Era, the prevailing progressive opinion was that putting women to work outside the home was exploitation, and bringing more women (mothers at least) into the workforce was viewed as a tactic by wealthy business interests to lower wages.

The first thing to take care of is whether "household" income is being used, and whether that matters. If a man and a wife earning equal amounts get divorced,we have 2 households earning $50,000 each instead of one earning $100,000.

how do they measure productivity. i probably need to go investigate this.

i can tell you the average worker under age 30 is less productive now for sure. however, due to tech, mainly the personal computer revolution, they get more office busywork done faster and easier than was possible in 1973.

no way they get more real work done on average. no way. they are lazy, addicted to their phones and devices and facebook, don't work hard, take drugs (casual use of minor to moderately illegal drugs seems to be up, not down, from what i read from people with actual hiring power in small to medium businesses), seem to have more misdemeanor crimes on their record which disqualify them from work, et cetera.

you should hear what the skilled blue collar guys i know have to say about them. the mechanics and carpenters and plumbers and technicians and factory foremen. they say this new generation is useless. some guys i know in the hood who run landscaping crews have trouble keeping the under 30 crowd employed even as grass cutters, because they just won't work much.

maybe you can cut grass 15% more efficiently today than when i ran my own grass cutting crew with 2 friends for a couple years back in the 90s, due to improvements in the 2 cycle engine, self propelled lawnmowers, and slight improvement in the MPG of the truck you use to pull the trailer, but that's about it.

the grass crew would clear driveways in the winter. the snowblowers were fine the 90s. are they really better now? are we actually clearing snow from the driveways and highways better now? are we even building highways and railways better now? heck, are we even BUILDING any highways or railways? i read that it costs 3 million dollars PER MILE for a 4 lane highway now. NO WAY ON EARTH was that how much it cost in 1973. productivity is DOWN on that.

i know FOR SURE nuclear power plant construction is a lost ability, and productivity is WAY down all over the world on that except in china, where it's WAY up. they can build an AP1000 or an EPR in 4 years, in the US it would probably take 8 years. building anything in the united states, in fact, is WAY slower and WAY more expensive than ever. productivity in construction HAS to be at an ALL TIME low.

i definitely agree with the eocnomists who say the united states economy is actually mostly leaning on older workers, people 45 and up, who are doing all the heavy lifting and real work.

maybe the younger guys in the energy industry are doing an ok job, getting more coal and oil and natural gas, and maybe the younger guys in the agricultural industry are getting more food output due to mechanization of the modern american farm, but the rest of these guys in the labor force aren't producing much more now than they were 40 years ago.

are we pretending that the upcoming generation of mexican high school dropouts is going to be 80% more productive than the euro american workforce from 1973? this seems completely impossible. i get daily battle reports from the trenches on these people, from friends in various industries, and most mexicans are far less productive employees.

i'd bet a good amount of money that it's the over 45 white guy crowd, using available tech improvements, who account for most of the increased productivity. of course, that creates a scenario where, as they slowly but steadily age their way out of the workforce, skills and ability leave the US workforce and are replaced by:

1) the new generation of white americans who all went to college, and now have a degree, no skills, and a big pile of debt

2) africans, who are mostly useless to a year 2020 modern technological society. with existing affirmative action laws they're probably a net detriment, actually

Now Steve, I'm sure both Steven Greenhouse and Jared Bernstein have photos of the great grandfathers at Ellis Island which proved - incontravertibly _ that immigration is an unfettered boon for America.

actually now that i think about it, energy industry ROI is lower now than ever for oil. it's never been more expensive to extract oil in the US than it is today. "lifting costs" is what they talk about when they talk about that, and it's higher today in real dollars than in 1973, in some cases, dramatically higher. so productivity is way down there.

fracking is expensive, energy intensive, labor intensive, and the decline rates of the wells is high. fracking for oil is a red queen scenario. to increase output, well count must also continuously rise. oil sands operations are even more expensive, energy intensive, and labor intensive.

coal is slightly more expensive but still not expensive relatively speaking. maybe 50 bucks a ton on freight rail for bituminous, but still higher today in real dollars than 1973.

natural gas is in a glut at 3 dollars, but it's not a big part of energy production, yet anyway, so it's not a big factor in the calculation.

probably what's really improved is mechanization in factories and farms. that has to account for the majority of increased productivity. but what that means is, there will be less and less jobs in the future for these high school dropout mexicans, as more and more labor is mechanized or roboticized.

Was that really a matter of feminism? Or did women enter the work force because men's wages stagnated and taxes (including the costs of commuting and private school tuition necessitated by desegregation dictates) shot through the roof?

Nationwide productivity is inversely related to the consumer price index. And the way the CPI is calculated has been changed several times since the 80s, always in favor of reporting lower inflation. So it's not surprising that productivity increases seem lower than economists report. Certainly things like road projects seem to take longer and cost more every year.

Was that really a matter of feminism? Or did women enter the work force because men's wages stagnated and taxes (including the costs of commuting and private school tuition necessitated by desegregation dictates) shot through the roof?

Feminism hit hard between about 1969 and 1973, before wages started stagnating, and one of the early demands was more women into the workforce.

Cail Corishev said..."Right, because the socialists among us certainly don't support mass immigration."

This one doesn't.

The reason capitalism leads to open borders is because capitalism seeks to dehumanise the working class in order to commoditise labour. The conditions which lead to mass immigration are created by capitalism. It is just a facet of the immiseration of labour. The support of the new class for mass immigration is them pursuing their class interest within capitalism.

So long as we have the kind of capitalism we currently have attempts to resist the immiseration of the working class, whether that be through fighting immigration or fighting union busting are simply futile. Replacing or at least reforming capitalism into a 21st century Fordism is a necessary though not sufficient step toward building a better alternative to the present state of affairs.

Is it going to happen? Probably not. We are just going to be immiserated.

This is perhaps the most signiicant untold story of modern America - namely the closing of the American dream and the fact that each generation gets poorer than the previous generation, how far this will go no one knows. From an objective point of view it seems a sight worse than he so-called 'Brezhnev stagnation' that afflicted the Soviet Union in te 1970s and eventually lead to its downfall. The fascinating fact is that the owners, the capaitalists are creaming off an ever larger slice of the pie as interest, profit and dividends whilst the American worker has to scrabble like a dog for scraps thrown off the table. This trend more or less coincides with the Republican swing towards Friedmanism after Reagan. In fact it was deliberate and planned - and worked a treat.

Irishman - good to hear that. Ive ended up here on the 'right' because I despair of the left. Racism or rather anti-racism has been used to destroy the left. Left/liberals would rather die than be accused of racism, thus that is the weapon directed at them, it destroys them like a laser beam.

Even better they actually believe that as anti-racists they are sticking it to The Man, speaking truth to power. Of course its The Man sticking it them. But the thrill of that supposed rebellion is a little extra high that keeps them coming back for more.

Well, Reagan won because whites in the early 1980's still had a lot of middle class folks, housing was cheaper in California. In fact, California in the 1970's was the key to Reagan's victory since whites in Orange County and San Diego didn't want to pay the higher property taxes prop 13 and many of their kids at that time were basically finished with K-12 and the increase in college wasn't too much more in the 1980's. The Republicans forgot that t have low taxes and social spending you needed a white majority middle class. In fact, there are few states were whites are poor where the Republicans do good, only Kentucky and West Virgnia fit that in most places in the South whites are more middle class while minorities are poor.

You guys' first problem was believing what you read in the New York Times.

"'Some people think it’s a law that when productivity goes up, everybody benefits,' says Erik Brynjolfsson, an economics professor at the Massachusetts Institute of Technology. 'There is no economic law that says technological progress has to benefit everybody or even most people.'"

What he should say is that economists don't know why compensation tracks with productivity, but it sure as hell does...all the way back the 1860!

http://brookesnews.com/061809stiglitz.html

Notice how the NYT and other leftist rags always use bullshit like "full-time workers" (why not all workers?) or "wage rates" (which don't include benefits) to try and conjure up some fake decoupling between pay and productivity? Didn't somebody once say something about lies, damned lies, and statistics...

That being said, there does appear to be a slight decoupling that begins sometime around the middle of the last decade, but viewed relative to the long-term trends, it looks more like statistical noise than anything. It certainly isn't because of immigration (since there's virtually no correlation between it and immigration rates), or a "crisis in capitalism" (just go kill yourself, Cail, you'd be doing the world a favor).

Immirgation and the decline of the aeorspace met that after 1988 that Republicans could not win the presidential elections in California, Oregon or Washington. Republicans were already strong in the south and ignored California where they got lots of money out of Orange County Lincoln Club and San Diego Republicans since they could only win local elections or congressional seats like Issa who was all upper class to wealthly San Diego has been recently changed to San Diego/South Orange County.

Well many Republicans and Libertarians ignored what Friedman stated you can't have open immirgation in a welfare state. Freidman came from an immirgant Jewish family and his mother sewn in a sweatship. The different between hispanics that come here and Jews in the early 20th century is that the Jews will get themselves out of the sweatshop jobs faster than then hispanics.

It’s one of the wealthiest counties in Texas, ranks sixth in the country for jobs and boasts a median household income of $80,504. . This is why the Repubicians do good in the south cheaper housing but a lot of upper-class whites and wealthy have moved in to escape the taxes and housing costs of the north. Wealthy and upper class among Republicans have different politics than those among liberals.

You, Steve, of course are perfectly correct about immigration but that's probably just a minor factor. I wish to God that it was the major factor but I'm not that hopeful.

All should read Race Against the Machine by Erik Brynjolfsson and Andrew McAfee. I read it a couples weeks ago and I have been deeply depressed ever since.

It's a tiny book - less than a hundred pages and half of those are padding. There are only three short chapters with actual material. It's more like a magazine article than a real book.

But no matter how short the message is, it packs a punch. The basic ideas are that the current economic crisis is not a recession. It is not just the downside arm of a business cycle. It is a new permanent economic configuration.

In this new configuration machines have reached the point where they produce a large proportion of our national production. This means the owners of the machines - the top corporate executives and their corporations profit without the need for workers. So we see corporate profits up and total wages down.

There is I believe a downside business cycle component too in our present situation but the authors point out that the new configuration has been been growing since 1970 or so. Perhaps the recession will end but if it does, very few will be re-employed.

Officially we came out of the recession four years ago in 2009. We have some economic growth again but we did it without the need for any employees, either new employees or returning employees. Employers will invest in new equipment. They will not hire new workers.

Arnold was right - the machines are coming for us.

When I was a kid I used to love those Sci Fi stories about the far future. Stories about young men who live an ancient earth city tens of thousands of years in the future. Maybe the first of these was Well's The Time Machine. The action takes place in an impossibly distant future. But the real future looks to be like what you see on reality shows on cable TV. Instead of sunny millenia long afternoon for humans, the future looks to be like a typical episode on How Do They Do That? - an entire factory that creates a product from scrath with no humans in sight. People need the lights on, machines don't. We are approaching complete "Lights Out" factories.

Those distant human filled worlds won't happen. There will be no people in only a few hundred years unless much changes. Several billion years of evolution resulted in the modern human. But now we have created artificial rivals in an eye blink.

After Karpov's defeat and the Jeopardy results last year it's hard to be optimistic. It doesn't take much imagination to see machines triumphant in every field of human endeavor.

In the short run it may mean race war. Currently the job market is tilting strongly away from the not so bright. This is new. In the nineteenth century there was no reason why an unskilled and uneducated man would be unemployed. Today those without high school diplomas look to be permanently out of work.

This new economic configuration hits blacks hardest because they are the least educable. 40% of black teens are unemployed today. They will likely stay unemployed for the next decade. If that happens and the ranks of the black teens swell, there could well be an explosion.

Irishman says "because capitalism seeks to dehumanise the working class." ---- This is the problem with socialist theology. It seeks to anthropomorphize non-human entities like markets. As such, it is part and parcel of the broader problem Steve describes; the inability of many to process objective data without putting it through a moral filter. Markets don't humanize or dehumanize persons. That's just another of Marx's stupid attempts to make a theological assertion seem to be something else. Friedman noted that open borders would only work in the absence of social welfare programs. Whether he's right on this or not is subject to dispute, but the fact that the civil war was fought so Northern industrialists could close borders to foreign imports suggests that capitalism as a philosophy is not structurally opposed to closed borders.

"Right, because the socialists among us certainly don't support mass immigration."

This one doesn't.

The reason capitalism leads to open borders is because capitalism seeks to dehumanise the working class in order to commoditise labour. The conditions which lead to mass immigration are created by capitalism. It is just a facet of the immiseration of labour. The support of the new class for mass immigration is them pursuing their class interest within capitalism.

This may have made you a leftist 30 years ago, but I'm afraid that now it puts you on the right-wing fringe. The left is about racial and sexual identity politics.

I don't know if that completely true. Eastern European countries borught in their comrades from poorer communists countries. East Germany had a lot of workers from Vietnam. The only differnce is the old communists system put almost everyone into a job and promise everyone an apartment with several relatives living there. The old communists systems where not much better. And welfare states in Western Europe had to cut back some on their welfare. I read on a blog on Sweden there are even a few homeless there.

Actually, the far left has always supported high immirgation in the US. The communists party and the Socialist Party and Occupy War Street think that hispanic immirgants will lead to a class revoluation I been on their webistes. In their May Day demostrations they support immirgation-legalization to bring down the capitalists. In England in the 19th century they saw Irish Immirgants as the means to power and the labor party in England in the 19th century. grew because of immirgants that had the long low paying jobs. In the United States Anarchists were mainly foreign born. That's why the left sometimes supports high levels of immirgation to bring the system down.

What is interesting is the old Soviet Union didn't have progressive tax rates it was mainly comsumption and not high. It had a welfare that provide you with the bare essentials an apartment, medical care.

"i can tell you the average worker under age 30 is less productive now for sure"

I have been hearing this quote all my life, from self-righteous self-hating old fogeys, starting when I was five years old. This quote was probably old in Socrates's time.

And there are just so many on my lawn. Maybe if those slackers understood walking uphill in the snow both ways, they would work harder.

Isn't that true. And maybe if those slackers died gloriously every day, like kamikaze pilots, for god king and country, instead of sitting on their bourgeois asses, the world would be a better place today.

pat/albertosaurus: you nailed it. there certainly won't be an increased need for janitors. i for one welcome our new permanent economic configuration. well, not really - more & more of the income of the producers will go to appease the dumb aggressive impulsive ones. & appeasement is rarely a good long-term strategy. panjoomby

I'd just like to point out as always, that if businesses were investing in new labor saving capital and technology at any serious level, they'd be hiring all those college graduates, raising their wages, and spending money to train their existing workers instead of doing the opposite.

@Irishman: "Complaining about immigration without addressing the issue of free market economics is like complaining about lung cancer and not mentioning smoking." - Your argument makes it sound like we could bring the entire third world here, but that everyone would have a high paying job if only it weren't for those mean old capitalists.

@Jody: "how do they measure productivity. i probably need to go investigate this." - it is likely that those statistics are to some degree cooked. the bls head admitted that outsourcing was counted as a labor saving improvement."they say this new generation is useless." - thats going to happen when this new generation was divested from society and divorced from social networks and opportunities, ie the exact opposite of what happened to the complainers. they get to a)deal with it, and b)pay through the nose to fix it.

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